2022 (9) TMI 233 - AT - Income Tax

Addition of cash found during the course of search - unexplained money u/s 69A - As per assessee the said cash was part of the families regular cash savings and balance kept in the locker - HELD THAT - It is to be noted that the amount found during the search action was a small amount which the assessee has claimed that the same has been saved out of past savings during long time by him and his wife. Though the aforesaid amount has not been reflected as cash in hand in the balance sheet of the assessee, however, considering the smallness of the amount and that too was found from the locker of the assessee which was placed along with jewellery of the family and that the amount was out of past savings of the assessee family and hence, we are of the view that the addition of the aforesaid amount was not warranted in this case. The same is accordingly ordered to be deleted. Addition of the value of jewellery seized during the course of search as unexplained u/s 69A - said jewellery belonged to the assessee and his family members on record of the department covered by the VDIS 1997 - HELD THAT - In this case, as submitted by the counsel of the assessee, if the entire jewellery found in the locker is considered, still the same is less by 700 gms which a normal middle-class family was supposed to possess out of the past savings, gifts etc. Therefore, in the light of the above observation of the Hon ble Gujarat High Court in RATANLAL VYAPARILAL JAIN 2010 (7) TMI 769 - GUJARAT HIGH COURT the aforesaid jewellery found from the locker of the assessee being less than the minimum quantity as instructed by the CBDT which a normal family under normal circumstances is supposed to possess, we do not find any justification on the part of the lower authorities to treat the same as unexplained. Also the above found jewellery is even otherwise less than the value of the jewellery already declared by the assessee in the valuation report from 1997 to 2006. In view of the above, the addition made by the lower authorities is ordered to be deleted. Assessee appeal allowed.

Summary

Issues involved:
1. Addition of cash found during a search as unexplained money under section 69A of the Income Tax Act.
2. Addition of value of jewellery found during a search as unexplained under section 69A.
3. Interpretation of CBDT circular on jewellery limits.
4. Discrepancy in description of disclosed jewellery.
5. Assumption of undisclosed jewellery in the possession of the assessee.
6. Application of CBDT circular on jewellery seizure.
7. Reproduction of grounds 1 and 6 in the appeal.

Issue 1: The assessee appealed against the addition of cash found during a search as unexplained money under section 69A. The Assessing Officer considered the cash in hand based on the balance sheet of the family members, leading to an addition of unexplained income. The CIT(A) considered the cash balance as on 31.03.2019, restricting the addition to a certain amount. The ITAT held that the cash found was from past savings, not warranting an addition, and ordered its deletion.

Issue 2: The appeal contested the addition of jewellery found during a search as unexplained under section 69A. The CIT(A) seized a portion of the jewellery, considering discrepancies and failure to explain the source of investment. The ITAT noted the CBDT circular on jewellery limits and observed that the seized jewellery was less than the amount disclosed in the valuation reports. Following legal precedent and the circular, the ITAT deleted the addition made by the lower authorities.

Issue 3: The interpretation of the CBDT circular on jewellery limits was a crucial aspect of the case. The ITAT referred to legal precedent and the circular's guidelines to conclude that the seized jewellery was within permissible limits, considering customary practices and family possessions. This interpretation influenced the decision to delete the addition of jewellery in the appeal.

Issue 4: The discrepancy in the description of disclosed jewellery was highlighted during the proceedings. The ITAT considered the failure to provide proof of remaking old items and the mismatch with the valuation report. However, based on the absence of additional jewellery beyond the disclosed valuation and legal principles, the ITAT ordered the deletion of the addition.

Issue 5: The assumption of undisclosed jewellery in the possession of the assessee was addressed by the ITAT. Considering the circumstances and the absence of evidence supporting additional jewellery, the ITAT found no justification for treating the seized jewellery as unexplained, leading to the deletion of the addition.

Issue 6: The application of the CBDT circular on jewellery seizure was a critical point in the appeal. The ITAT relied on legal interpretations and the circular's guidelines to determine that the seized jewellery was within acceptable limits. This reasoning influenced the decision to delete the addition made by the lower authorities.

Issue 7: Ground 7 was treated as allowed based on the observations and decisions made regarding grounds 1 and 6 in the appeal. The ITAT ultimately allowed the appeal of the assessee, overturning the additions of cash and jewellery made by the lower authorities.